The Role of Accounting in MSMEs
The Role of Accounting in MSMEs
In the current era of globalization, business ventures are run with various types. Surely everyone is familiar with hearing MSMEs, commonly known as Micro, Small, and Medium Enterprises. MSMEs are businesses run by individuals, households, and small business entities, they are classified based on their annual turnover, the amount held by assets or wealth, and also the number of employees working in small businesses. In this era of uncertain economic conditions, many large companies are experiencing a recession, one of which is the weakening of the Rupiah against foreign currencies. One of the main milestones that can maintain the Indonesian economy is MSMEs. In addition, this business is very important to the country’s economy because it is the largest contributor to GDP. However, there are still many MSMEs whose economy is less stable due to a lack of awareness of the importance of accounting for their business.
Most MSME owners think that accounting is not important for their business. They focus more on developing their business through marketing, finding suitable suppliers, providing good service, but never knowing in detail the flow of outgoing and incoming costs. In fact, in running a business, there are many financial problems such as the incompatibility of employee salaries with their contribution to the business, damaged inventories, uncollectible accounts receivable, and many other problems. To be able to overcome these problems, the role of accounting is needed.
There are many roles of accounting in dealing with corporate matters. The first is delivering useful information for business planning. By applying the accounting cycle to MSMEs, it can provide useful information for the owner, especially in terms of finances that occur in their business. This information can help owners to determine the right strategic steps to develop their business. The second is knowing the financial position of the business. Entrepreneurs can monitor a list of buying and selling transactions that occur in their business to find out the amount of capital spent at that time, the debts and receivables they have, and the value of assets in their business. Furthermore, the role of accounting is to provide an overview of the company’s balance sheet, which makes it easier for business owners to know the pros and cons of the ongoing business. Currently, MSME owners only keep simple records of the flow of money in their business. However, if they apply the entire accounting cycle, they can know for sure the amount of profit, loss, amount of capital, and debt in his business.
The application of an accounting system is also useful in terms of taxation, which can simplify the calculation of business taxes that needs to be reported. As we know, micro, small, and medium scale businessmen, including taxpayers, need to report and pay their business taxes. Tax reporting will be less smooth when business people do not have neat and precise company financial records. The MSME owners may not know the amount of tax they need to pay because there is no neat and correct income report. When they apply the accounting cycle in their MSMEs, they will know the amount of net income so they can calculate the amount of tax they need to report and pay each period. Last but not least, by knowing the cash inflows and outflows, the list of transactions that occur during running the business, and seeing the company’s financial condition from this accounting cycle, the MSMEs owner will get an idea of the performance of his business.
However, this accounting process takes a lot of time and money. Especially when the business owner does not have sufficient insight on accounting. Therefore, MSMEs can use accounting software where the owner does not have to hire an accountant and save costs. Accounting software can also calculate automatic taxes, update the latest reports, track product sales, manage assets, perform audits of data intended to automatically match transactions, and various other advantages. The most important thing is to adjust the budget to what is needed. Whether it’s using manual recording or using accounting software, both support MSMEs to grow.
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